Beware Tax Consequences of Amazon FBA Donation Program

Amazon sellers who participate in Fulfillment by Amazon (FBA) currently pay fees to have the marketplace dispose of their unwanted inventory, including returns and overstock products. Amazon can choose to destroy the inventory, or - at least for its own products - dispose of inventory by selling it to liquidators who can resell it.

In a recent blog post, Amazon announced a new program called FBA Donations that "enables donation of excess and returned products to charities for sellers who use Fulfillment by Amazon." It said the initiative builds on its history of donating millions of Amazon retail products to charities each year. It is working with Good360 in the US and with Newlife, Salvation Army, and Barnardo's in the UK.

Upon hearing the news of Amazon's new donation program, some sellers were confused about who would be able to take the tax write-off for donations made through the new program.

Sellers shouldn't make any assumptions - those with questions should consult their accountant. As one seller warned, removing items from inventory is a write-off, and merchants cannot report both the removal of inventory *and* the donation. 

Here's what Amazon states in its help file: "Amazon cannot provide tax advice to sellers who take part in the FBA Donations program. Contact your tax adviser to discuss the FBA Donations program and your tax reporting obligations."

Note that even when sellers opt to have Amazon donate their unwanted inventory, they will continue to pay disposal fees to the company.

The program starts on September 1, 2019, and while sellers can opt-out of the donation program at any time by disabling FBA Donations in their FBA Settings, it may benefit them in that their overstock won't end up in bin stores like the one in South Carolina we recently wrote about that lists overstock Amazon products for between $1 - $3, even for expensive unopened products. It also has the obvious advantage of benefiting charitable organizations. 

Interestingly, while it's sellers' stock they've paid Amazon to dispose of, the program reflects positively on Amazon's image. 

Here's an excerpt of Amazon's notice to FBA sellers:

"Amazon will automatically make eligible inventory available to charitable organizations when you choose to dispose of overstock, returns, and other unwanted items. The donation option will apply to inventory you select for disposal manually and through automatic disposal settings."

"Our usual disposal fees apply."

Comments (3) | Permalink